There are two countries, Nafe (N) and Hasi (H), that can each produce two goods: guavas (G) and raspberries (R). Guavas are capital-intensive whereas raspberries are labor-intensive. Table 2 displays the factor endowments of the two countries.

NAFE HASI

Labor force (millions of workers) - 38 24

Capital stock (thousands of machines) - 20 12

a) In a free trade equilibrium, what does Nafe export and what does it import?

b) Now suppose a massive earthquake hits Nafe and destroys half of the capital it originally owned. Will this have any effect on the what the country exports and imports?

c) In Nafe, who is better off in the new free trade equilibrium relative to the original equilibrium between workers and owners of capital?